INTRODUCTION
The purpose of this Alert is to draw attention to the Prime Minister’s announcement of Australia’s new 2035 greenhouse gas emissions reduction target and path to net zero by 2050. The new target was announced on 18 September 2025. The new target follows the independent advice of the Climate Change Authority and is supported by the release of a comprehensive Net Zero Plan, along with 6 sectoral decarbonisation plans.
As many entities prepare to identify their climate-related risks and opportunities in line with the requirements of mandatory climate-related disclosures, this update provides new publicly available information that will be an important reference point for assessing transition risks and opportunities, and assessing the climate resilience of any strategy to management climate-related risks and opportunities.
This document is heavily based on the Australian Government releases. Certain additions/amendments have been made for clarity and/or inclusion of additional guidance only. This is not an exhaustive list of all of the contents of the releases and does not replace reading the releases themselves.
Highlights
- 2035 Target: Australia will reduce national greenhouse gas emissions by 62-70% below 2005 levels by 2035. Adjusted for population growth, this equates to a 76-81% per capita reduction and is among the most ambitious globally.
- Alignment with Independent Advice: The target reflects Climate Change Authority recommendations, informed by CSIRO modelling, and considering climate science, economic and national interests, and emerging technologies.
- Net Zero Plan: Supported by 6 sectoral decarbonisation plans (Electricity & Energy, Industry, Resources, Transport, Agriculture & Land, Built Environment), the Net Zero Plan outlines pathways, policy levers, and investment priorities for decarbonisation across the economy.
- Funding Commitments: Includes a $5 billion Net Zero Fund (National Reconstruction Fund), $2 billion for the Clean Energy Finance Corporation, $1.1 billion for clean fuels, and $40 million for EV charging infrastructure.
- Treasury’s Economic Modelling: Treasury’s analysis indicates an ‘orderly path’ to net zero will support job creation, higher wages, improved living standards, and economic growth, while strengthening Australia’s international competitiveness.
- NDC Submission: Australia’s updated emissions reduction commitment through ‘Nationally Determined Contributions’ (or NDCs) to the UNFCCC was submitted, setting out Australia’s new 2035 emissions reduction target. However, there is some criticism that this target falls short of the NDCs required to achieve the Paris Agreement targets.
Importance to AASB S2 reporting entities
Entities preparing sustainability reports under Australia’s mandatory climate-related disclosure regime should consider how these national commitments affect their own transition risks and opportunities. Transition risks arise as national economies and organisations themselves transition to a lower greenhouse gas emissions future. Transition risks can result from regulatory changes, government incentives and guidance, and evolving investor expectations. The new target and Net Zero Plan are integral to the evolving regulatory and policy landscape and should inform climate scenario analysis and strategic planning.
Australia’s 2035 net zero target
- Scope: Covers all greenhouse gases and sectors, with priority actions in clean electricity, electrification and efficiency, clean fuels, new technologies, and net carbon removals.
- Comparison: The 2035 target is a substantial increase from the legislated 2030 target (43% below 2005 levels).
- Ambition: Designed to be ambitious yet achievable, balancing environmental, economic, and social considerations.
The Paris Agreement and Australia’s NDC
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 195 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016.
The Paris Agreement’s overarching goal is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels” (UNFCCC, 2025)
In recent years, world leaders have stressed the need to limit global warming to 1.5°C by the end of this century, as the scientific consensus indicates that crossing the 1.5°C threshold risks unleashing far more severe climate change impacts. To limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030.
In 2023, the signatories of the Paris Agreement were asked to align their NDCs with 1.5°C. For most countries this resulted in a need to increase their 2030 mitigation ambition as well as putting forward 1.5°C-aligned NDCs for 2035. Just months ago, the International Court of Justice confirmed that countries are obligated to do their utmost to ensure their respective NDCs represent the highest possible ambition.
While Australia’s new target is ambitious, some experts argue it falls short of what is needed to achieve net zero by 2050 and the Paris Agreement’s 1.5°C goal. For example, Climate Analytics recommends a target of at least 76% below 2005 levels by 2035, while UTS recommends an even more ambitious target of 75% below 2005 levels by 2030, and reaching net zero by 2035. Whether the target is ambitious enough or not, Australia’s new NDC will be a key reference for international partners and investors.
Climate Change Authority’s advice
Australia’s new 2035 target is aligned to the recommendations of the Climate Change Authority. The Climate Change Authority is an independent statutory body established under the Climate Change Authority Act 2011 to provide expert advice to the Australian Government. The Climate Change Authority recommended a 62–70% reduction by 2035, describing it as ambitious yet achievable and necessary to meet climate science and Australia’s long-term interests. The advice was informed by CSIRO modelling, which found that all major sectors can continue to grow in value and volume while decarbonising.
Treasury’s economic modelling
Treasury analysed three net zero scenarios, assessing impacts on jobs, wages, living standards, investment, and economic growth. The modelling informed the Net Zero Plan and sectoral strategies.
Key findings include:
- An orderly path to net zero supports more jobs, higher wages, and a bigger economy.
- Cheaper, cleaner energy will strengthen Australia’s international competitiveness.
- Decisive climate action positions Australia as a primary beneficiary of the global net zero transformation.
- Sectoral modelling highlights the shift from fossil fuel exports to minerals and resources essential for global decarbonisation. For example, the industrial sector is projected to halve its emissions by 2050, primarily through electrification, cleaner fuels, and new technologies, while maintaining or expanding its capabilities.
The Net Zero Plan
The Net Zero Plan provides a clear pathway to achieve the 2035 emissions reduction target and net zero by 2050 target, building on existing policies and technologies.
The five priorities include:
- Clean electricity across the economy
- Lowering emissions by electrification and efficiency
- Expanding clean fuel use
- Accelerating new technologies
- Net carbon removals scaled up
The Net Zero Plan shows how Australia can achieve net zero while growing the economy, delivering benefits for households and businesses, and creating new jobs.
“Historically, Australia’s emissions reductions have come from changes in the natural world, as opposed to cutting back on fossil fuels...Between 2005 and March 2025, Australia's emissions decreased by 28%. However, when you remove the land use sector, emissions have only dipped by a small 4% (ABC, 2025).”
Importantly, the Net Zero Plan will require significant emissions reductions across sectors that have yet to see any significant emissions reductions. As such, the Net Zero Plan is supported by 6 sector plans, including Electricity and Energy, Industry, Resources, Transport, Agriculture and Land, and Built Environment. All sectors must reduce emissions from current levels for Australia to achieve the net zero by 2050 target. The sector plans identify sector-specific pathways, technology needs, and investment priorities, as the pathway for each sector will differ. Some sectors have tried and tested solutions that need coordinated action, while others require innovation and investment.
Funding a 62-70% reduction by 2035
The Net Zero Plan is designed to leverage private sector investment alongside public funding, recognising the scale of transformation required.
Funding commitments include:
- $5 billion Net Zero Fund in the National Reconstruction Fund to help industry decarbonise and scale up renewables and low-emissions manufacturing
- $2 billion for the Clean Energy Finance Corporation to drive down electricity prices
- $1.1 billion for clean fuels production
- $40 million for EV charging infrastructure
- $85 million for frameworks and tools to help households and businesses improve energy performance
- $50 million for sports clubs to decarbonise
Conclusion
Australia’s new 2035 target and supporting Net Zero Plan represent a major step forward in national climate policy. The approach is grounded in independent advice, robust modelling, and sectoral strategies, providing a credible pathway for entities to align their transition plans and disclosures with national and international expectations.
Under the Net Zero Plan, the next frontier lies in the harder-to-abate sectors, including industry, transport, and resources. As such, we are likely to see significant regulatory and policy shifts. Entities should keep informed to understand where policy is heading, where the transition risks lie, and where the opportunities to strengthen their climate resilience will emerge.
FURTHER INFORMATION
If you wish to discuss any of the information included in this Sustainability Reporting Alert, please get in touch with your local Grant Thornton Australia contact or a member of the Sustainability Reporting Advisory team at sustainability.reporting@au.gt.com.
